Inflation Sticks At 1.8% In July

(BBC) – A KEY MEASURE OF INFLATION in the UK has unexpectedly remained at 1.8%.

Economists had expected the Consumer Prices Index (CPI) to decline to 1.5% in July.

The Retail Prices Index (RPI) inflation measure, which includes mortgage interest payments, also unexpectedly rose to -1.4%, from -1.6%.

The RPI rate has fallen sharply over the past year as the Bank of England slashed interest rates to a record low amid a recession. In June, it fell to its lowest since records started in 1948, according to the Office for National Statistics.

Among other things, the RPI should mean lower season ticket prices for trains next year.

Annual rail fare rises are pegged to the RPI figure in July of the prior year, plus an average of 1%.

So a £2,000 season ticket would fall by £8, based on an expected cut in prices of 0.4%.

Last July, the RPI was 5%, meaning that rail prices rose this year by 6%.

UK Cost Of Living Falls Most Since 1948

(Telegraph) – THE COST OF LIVING in Britain last month fell the most since records began more than half a century ago, as the recession drove down the cost of food and housing.

The broad measure of inflation, known as RPI, slumped 1.6% on an annual basis — its steepest decline since statisticians began compiling the figures in 1948. Compared with May, RPI climbed 0.3% — in line with City expectations.

Prices for a range of staples — including meat, bread, fruit, vegetables and dairy products — all fell as retailers sought to keep a lid on prices to attract shoppers.

The figures underline how the recession, which began in the second quarter of last year, has drained pricing power across the economy. The Bank of England has signalled it expects to keep interest rates at a record low of 0.5% in an effort to provide some life support to the economy.

We still believe ‘the bulk of the disinflationary effects of the deep recession in the economy have yet to be seen,’ said Jonathan Loynes, an economist at Capital Economics.